5 ways women can compensate for the gender wage gap

Women
may be the fairer sex, but they’re not the recipients of fairer pay. As a
result, they must work harder to maximize their money.

In 2014,
women earned only 79 cents for every $1 earned by men. That means a woman
entering the workforce today will earn about $300,000 less than her male peers
by the time she turns 59 – “a lot of money over one’s lifetime,” says Chandra
Childers, postdoctoral
research fellow for the Institute for Women’s Policy Research (IWPR).

The good news is woman appear to be making wiser financial
choices, according to a 2016
Experian study. Women have 3.7 percent less average debt than men, and
their average credit score of 675 is slightly higher than men’s average score
of 670. However, there is more that
women can do to level the playing field.

Here are five ways in which the financial playing field is tilted against women, and five ways women can lessen their effects.

If women are having more
trouble paying off student loan debt, they’re less financially secure in
general.

-- Kevin Miller
American Association of University Women

1. Women
start off in the hole. Nearly
70
percent of college graduates in 2014 had student loan debt, and the average
amount owed was $28,950, according to the American Association of University
Women (AAUW).But for women
graduates, student loan debt takes a larger toll. Four years after graduation, men
had paid off, on average, 44 percent of their student debt while women had only
paid off 33 percent, according to an AAUW study. Not only that, but 53 percent of women spent more on
student loan payments than they could comfortably afford to spend, compared to 39
percent of men.

The more women are spending on loan payments, the less
they have for major purchases such as a car or a house, says Kevin Miller, a senior AAUW researcher. “If women are having more
trouble paying off student loan debt, they’re less financially secure in
general,” Miller says.

How to lessen the impact: Social activism web sites such as
Sponsorchange.org and Zerobound.com let
college graduates volunteer in exchange for student loan payments. Loan
forgiveness programs can make a huge impact in debt repayment if you are
willing to spend the first 10 years of your career in a qualifying job, such as
in the public service sector, says Melinda Opperman, chief relationship officer
with Springboard Nonprofit Consumer Credit Management. And, as you earn salary
increases or are lucky enough to incur any financial windfalls, such as a tax
return or inheritance, put the extra money toward student loan debt so you can “consistently
pay more than the minimum required payment,” Opperman says.

2. Women have less access to credit. One of the biggest factors in being
approved for a loan is your debt-to-income ratio – the amount of debt you owe
in relation to the amount of money you make. Generally speaking, the higher
your debt-to-income ratio, the more of a credit risk you pose. Since women, on
average, have lower incomes, a woman may be less likely to be approved for a
house, a car or a high credit card limit than a man with the same amount of
debt. A 2015 study
conducted by the nonprofit policy organization Woodstock Institute found that Chicago-area
women were more likely than men to be denied mortgage loans because of their
credit histories and their debt-to-income ratios.

Many women are looking to work
longer and retire at an older age than 65.

-- Catherine CollinsonTransamerica Center for Retirement Studies

How to lessen the impact: To determine your debt-to-income
ratio, divide the sum of your monthly debt payments by your gross monthly
income. Women should aim for a ratio below 36 percent, Opperman says. When
using credit cards, try not to carry a balance, but if you do, make sure it’s
no more than 30 percent of the credit limit. So on a card with a $10,000 limit
keep the balance to $3,000 or below, Opperman says.

3. Women struggle more under credit card
debt. Just aswomen are taking
longer than men to pay off their student loans, they also take more time to pay
off credit card debt. A 2015
study by National Debt Relief found that 63 percent of women between 18 and
24 carried credit card debt compared to 36 percent of men in the same age
group. Among older women, 66 percent of women ages 55 to 64 carried credit card
debt compared to 33 percent of men. A 2014
survey by BMO Harris Bank echoed those findings, showing that 39 percent of
men always paid off their monthly credit card balance compared with 27 percent
of women. So why aren’t women putting more money toward their debt? They’re
struggling with basic expenses and don’t have money left, suggests a 2015
study by the Transamerica Center for Retirement Studies. In fact, the
highest percentage of women surveyed said their greatest financial priority was
‘just getting by.’

How to lessen the impact: If
you’re already in credit card debt, call your card issuer and ask for a lower
interest rate so you can pay it off faster. A CreditCards.com survey
found that 78 percent of credit cardholders who asked for a rate decrease got
it. If card debt is crushing you, it may also be time to visit a nonprofit
credit counselor affiliated with either the National Foundation for Credit
Counseling or the Financial Counseling Association of America. A counselor will
help negotiate with your card issuers for lower rates and put you on a
repayment plan that may help you free up some cash.

4. Women have less money to save. While saving is crucial to
financial success, a 2016
America Saves Week survey found that
women are less likely to put money away for a rainy day. Seventy-two percent of
men said they spend less than they make and save the difference compared to
only 60 percent of women. Furthermore, 54 percent of men said they save at
least 5 percent of their income compared to only 45 percent of women. Stephen
Brobeck, founder of America Saves and executive director of Consumer Federation
of America, blames the difference on the fact that men typically have larger
incomes, making it easier for them to squirrel some of their earnings away.

How to lessen the impact: Write down monthly savings
targets. America
Saves found that those who follow concrete steps toward specific goals save
more than those without a plan. Instead of spending salary increases, tax
refunds and other cash influxes, save them. Studies
show that women tend to give more to charities than men, so volunteer time instead
and bank the money you would have donated, Opperman says.

5. Women
have less to retire on. Men
have more than twice as much in retirement savings as women, with median
savings of $88,000 for men compared to $41,000 for women, according to the Transamerica
Center for Retirement Studies.Not only do women have
less money to put into their retirement plans, but less money in proper
investments means women aren’t benefiting from compound interest as much as men.
“That creates an even wider retirement income gap over time,” says Catherine Collinson, president of
Transamerica Center for Retirement Studies. Lower income also equates to
lower lifetime earnings, which could potentially affect a woman’s Social
Security benefit, Collinson adds. As a result, “many women are looking to work
longer and retire at an older age than 65.”

How to lessen the impact: Start making retirement
contributions as early as possibleand
get a deeper understanding of investing. “Go to a local community
college or extension program and sign up for a class,” Collinson says.

While
everyone can benefit from good financial habits, women stand to gain so much more,
Collinson says. “How you manage your money can have a potentially
greater effect than how much you may be missing out on due to the wage gap.”

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